NDA reigns blessed by oil prices, but shaken by rain shortfalls | business | Hindustan Times
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NDA reigns blessed by oil prices, but shaken by rain shortfalls

business Updated: Apr 23, 2015 17:16 IST
N Madhavan
N Madhavan
Hindustan Times

You could call it luck or a coincidence. Either way, the BJP-led NDA seems to have strange encounters with monsoon rains and oil prices — with the former giving it a tough time and the latter showering some blessings. Oil prices and the pattern of rainfalls over the past two decades suggest that Congress-led UPA seems to have enjoyed an opposite mix.

If the June-September south-west monsoon this year falls below normal as the Indian Meteorological Department (IMD) says, it would be a second difficult year for Prime Minister Narendra Modi. Annual rains fell 12 % below the long-term average (normal) last year, while the Met pundits had seen it 7 percentage points higher.

Modi began his rule last year a good 11 years after Atal Behari Vajpayee ended his back-to-back reign in two spells that lasted six years from 1998 to mid-2004. Both leaders have had oil prices easing, at least in the earlier parts of their rule and certainly enjoying better luck with global crude prices.

Petroleum, oil and lubricant (POL) imports account for roughly a third of India’s total import bill — and also influence the value of the rupee that aids or mars trade balance. Monsoons account for 70% of India’s annual rainfall – and can fan up food prices if they go bad. The two levers can shrink or enhance the elbow room for budgetary spending and imports.

Global oil prices have fallen by nearly 50% since Modi assumed office last year. While both Modi and Vajpayee have seen monsoon hiccups, UPA’s Prime Minister Manmohan Singh had just one bad rain year in 2009, when India saw its worst drought in nearly four decades with the monsoon slipping 22 % below its longterm average and farm output fell 12%.

Prime Ministers HD Deve Gowda and Inder Kumar Gujral ruled between 1996 and 1998 for the United Front and faced an industrial decline, and the benchmark Brent crude price, a global benchmark slipped from around $20 per barrel to $14 levels during the period.

Vajpayee had better luck. Brent prices slipped below $11 in June and strangely helped him cope with the after-effects of India’s nuclear Pokhran II nuclear tests in May, 1998. Brent slipped to below $10 in November-December that year, helping the NDA to weather the external shocks of the sanctions against India.

But they more than tripled over the next four years, peaking to $34 levels in March, 2003 but growing exports cushioned India.

However, Vajpayee suffered in 2002-03 when the monsoon slipped 19% below normal and farm output also fell by 19%. GDP growth fell to 3.8%.

When the UPA upset NDA’s “India Shining” campaign to ride to power in 2004, oil prices shot up further but Singh had a great run with the monsoons.

UPA’s finance minister P Chidambaram did enjoy some luck with rains. But oil was a different story as it zoomed from $37 levels in 2004 to $140 in July, 2008. It fell later but only on account of the global financial meltdown. Oil surged again – as if to wait for Modi to assume power.